Aston Martin shares plunge on volume target cut, lingering debt

Aston Martin has reported a loss adjusted to PS48.4 (US$58.8m) for the quarter ending September, and a revenue net of PS362.1m.

The next-generation DB12 was delivered in the first quarter of this year. Volumes are expected to drop from the previous estimate of 7,000 units to 6,700 units by 2023.

Aston Martin shares were down 11% by 10:01 a.m. London-time on Wednesday morning. This was a slight reduction of losses incurred when the British luxury automaker reduced its volume target because of production problems with its new DB12 and reported a larger-than-expected quarter loss.

Shares of the company had fallen by up to 20% earlier in trading.

Aston Martin has reported a loss adjusted to PS48.4 (US$58.8M) for the quarter ending September, and a revenue net of PS362.1. This is below the consensus estimate of PS370.

The next-generation DB12 was delivered in the first quarter of this year. Volumes are expected to drop from the previous estimate of 7,000 units to 6,700 units by 2023.

Aston Martin's earnings report said that the ramp-up of DB12 production was temporarily affected by the delay in supplier readiness and the integration of the new EE platforms, which support the fully redeveloped information system.

The company said that the issues have been resolved, but they had an impact on third-quarter production and capacity for the full year.

Aston Martin's Executive Chairman Lawrence Stroll stated that the launch of the DB12 had seen "extraordinary" demand and was bringing in new clients, with 55% initial DB12 purchasers being new to the Aston Martin brand. The company plans to launch a new sports car during the first quarter 2024, and is expecting a "similarly resounding" response.

Stroll said, "Starting deliveries of our new generation of sports car is a significant milestone that marks the beginning of an entirely new line-up of front-engine sports cars which will reposition Aston Martin to be a high-performance ultra-luxury brand and enhance our growth. It will also bring higher levels in profitability."

The company has maintained its outlook for 2023, citing the strong demand for sports cars of the next generation as a driving force behind its plans to increase cash and margins.

There is still a "big pile of debt"

The British household brand sought to raise over PS200 million in the summer from investors to help pay off its significant debt.

In an effort to reduce the debt, shareholders such as Stroll's investment group Yew Tree and Saudi Arabia Public Investment Fund purchased new shares. The company's stock price tripled by the end of 2023 from its all-time low in November 2022. However, it has since fallen back into a steady decline.

Russ Mould said that the disappointing earnings came at a bad moment for Aston Martin’s hopes of a recovery in its share price.

He said that the company was experiencing strong demand, but with losses exceeding expectations, the market had little reason to give Aston Martin a second chance for any misstep.

For now, the forecast of PS2 billion revenue in 2024 and PS500 millions in adjusted earnings is not given much credence.

Aston Martin's net debt was 750 million pounds sterling in the third quarter, down from 766 million pounds sterling at the end 2022. The company said that it is still focused on reducing debt and reducing leverage as described in July.

"It still sits on a huge pile of debt, and continues to deleverage a stressed balance sheet. It is true that the company has made progress in addressing some of its problems, but the results are still too late to be considered satisfactory.

The optimistic comparisons Aston Martin had made with its Italian rival Ferrari now seem as far-fetched as ever.